Report: Wells Fargo may act on clawbacks before House...

1of3Wells Fargo & Co.’s most senior executives decided early this year to remove retail-banking chief Carrie Tolstedt from her post, months before she announced plans to retire and her division became the epicenter of a national scandal.Photo: Joe Raedle /Getty Images

2of3Wells Fargo CEO John Stumpf has unvested stock awards that could be worth $36 million if the bank hits certain financial targets, according to regulatory filings. That figure could be increased by another grant, likely awarded in February, that won’t be disclosed until Wells Fargo files its next proxy statement. The firm could recoup those awards under its clawback policy.Photo: Susan Walsh /Associated Press

Wells Fargo & Co., grappling with fallout from a scandal over unauthorized customer accounts, is close to deciding whether it will claw back pay from CEO John Stumpf and former retail bank head Carrie Tolstedt, the Wall Street Journal reported.

The bank’s board may act before Stumpf testifies Thursday at a hearing of the House Financial Services Committee, the newspaper reported Tuesday, citing a person familiar with the matter.

Wells Fargo hired a law firm to advise the board on potential clawbacks. Robert Mundheim, a lawyer with Shearman & Sterling LLP in New York, was retained to help the board determine whether to recoup compensation from Stumpf, Tolstedt and Chief Operating Officer Tim Sloan, the newspaper reported Friday.

Oscar Suris, a spokesman for the San Francisco-based lender, declined to comment on the report.

Tolstedt, 56, ran the retail bank when employees potentially opened more than 2 million bogus deposit and credit-card accounts. Wells Fargo announced in July she was retiring and would be replaced by retail brokerage head Mary Mack. Stump, the CEO since 2007, was urged to return compensation and resign by Massachusetts Democrat Sen. Elizabeth Warren during a Senate Banking Committee hearing last week.

Stumpf, 63, has unvested stock awards that could be worth $36 million if the bank hits certain financial targets, according to regulatory filings. That figure could be increased by another grant, likely awarded in February, that won’t be disclosed until Wells Fargo files its next proxy statement. The firm could recoup those awards under its clawback policy.

Wells Fargo also has the ability to claw back unvested shares from Tolstedt, according to its proxy filing. She has about $19 million of such awards, the bank said in a Sept. 19 letter to members of the Senate. Cash and stock she already owns — including about $44 million of shares amassed during her 27-year career and $34 million in previously vested stock options — can’t be recovered, according to the bank’s filings.

Wells Fargo, which settled allegations with regulators on Sept. 8 and paid $185 million in fines, didn’t admit or deny wrongdoing. The bank fired 5,300 workers over five years — about 10 percent of them managers — and said it would eliminate sales goals regulators blamed for encouraging the creation of the bogus accounts. The Justice Department also has opened an investigation, a person familiar with the matter said last week.

In addition, the Labor Department has agreed to conduct a review of Wells Fargo, which was requested by lawmakers including Warren, who said the bank may have put undue pressure on employees to meet sales quotas.

Lawmakers had asked the agency in a letter last week to investigate. They said they want to know whether the company violated wage and overtime rules while pushing branch workers to meet aggressive targets.

“Given the serious nature of the allegations, the recent actions of our federal partners, and recent media reports, I have directed enforcement agencies within the department to conduct a top-to-bottom review,” Labor Secretary Thomas Perez responded Monday in a letter obtained by Bloomberg. The agency has established a working group to carry it out, he said.

The inquiry adds to scrutiny of Wells Fargo from federal agencies and Congress after the bank agreed to pay $185 million in fines to authorities including the Consumer Financial Protection Bureau for potentially opening more than two million bogus accounts.

In last week’s letter, lawmakers said Wells Fargo employees described being chastised and forced to work extra hours to meet quotas. Wells Fargo said at the time that it prides itself “on creating a positive environment for our team members, including market-competitive compensation, career-development opportunities, a broad array of benefits and a strong offering of work-life programs.”

A bank spokeswoman declined to comment on Perez’s response, which was reported earlier by Reuters. Warren praised it.

“Every other federal agency with jurisdiction in this matter should follow DOL’s lead and promptly determine whether Wells Fargo and its senior executives should be prosecuted or otherwise sanctioned,” she said in a statement.